China and Hog Kong Indexes Plunge Amid Tariff and Rate Path Worries

Li Chen
28 Feb, 2025
Hong Kong

Stock market indexes in China and Hong Kong dropped sharply amid escalating trade tensions with the U.S. 

The Hang Seng index dropped more than 3%, and the mainland-focused CSI 300 declined 2%, as investors worried that continual increases in the U.S. tariffs will dampen China's export growth.

For the week, the Hang Seng index and the CSI 300 index declined more than 2%, and they trimmed this year's gains. 

The decline in Hong Kong indexes was driven by a sharp fall in tech and broader stock indexes on Wall Street as traders rotated out of stocks and chased rising bond yields.

The yield on the 10-year Treasury notes rose and approached 4.8%, and the additional U.S. tariffs are likely to fuel inflation, slow down economic growth, and encourage the Federal Reserve to keep higher interest rates for longer. 

The latest market sell-off was sparked by comments from the U.S. president that goods from Mexico and Canada will face 25% tariffs as of next week. 

Moreover, Chinese exports will face an additional tariff of 10% on top of the previously announced 10% tariffs a month ago.

Overall, many consumer and electronic goods shipped from mainland China now attract as much as 60% in tariffs, compared to no import tax in 2014.

Despite the Trump rhetoric and new tariffs, exports of goods made by Chinese companies to the U.S. will continue to rise over the next four years, as manufacturers shift production to Mexico, Vietnam, and the ASEAN region. 

 

China Indexes and Stocks

The Hang Seng index declined 3.4% to 22,918.05, and the CSI 300 index dropped 2% to 3,890.05.

Internet platform operators and advanced technology companies extended weekly losses in Friday's trading, as new U.S. tariffs could spark a slowdown in sales. 

Moreover, the DeepSeek-driven rally faced a wall of stretched valuation and growing skepticism that the emergence of affordable artificial intelligence may fall short in delivering earnings growth as widely anticipated. 

Alibaba Group Holding decreased 5.8% to HK $127.90, Tencent Holdings dropped 3.3% to HK $478.80, and JD.com fell 4.4% to HK $160.0.